Summary of Key Points
The surge in demand for AI computing power has fueled the PCB (Printed Circuit Board) industry, leading to a competitive race among companies to expand production. This year, more than 20 enterprises have planned investments totaling over 70 billion yuan, all targeting high-end areas such as AI servers and high-speed optical modules. While the performance of leading firms varies, the overall trend is positive, with many reporting pre-tax profits increases of over 50% for the first half of the year. The industry is transitioning from producing standard PCBs to more sophisticated ones, and the market has responded positively, as evidenced by stock prices (for example, Pengding Holdings' stock has risen by 77% this year).
I. How Intense Is the Expansion Trend?
PCB companies have been investing heavily in capacity expansion this year:
- Pengding Holdings is the most aggressive: It has invested in AI-related projects three times in the past year, with a total investment of over 30 billion yuan (10 billion in Shenzhen, 12.7 billion in Huai'an, and 8 billion last year), aiming to build a high-end PCB production base with an additional 650,000 square meters of capacity.
- Other companies are following suit: Hongban Technology invested 6 billion yuan in one day (5 billion for high-end precision boards and 700 million for facility upgrades), Jinan Guoji invested 2 billion yuan in copper-clad laminate (a core material for PCBs), and Weilao raised 1.3 billion yuan to build high-end projects in Jiangxi and Thailand.
- The scale of the expansion is staggering: Over 20 companies have announced capacity expansions this year, with a total investment of over 70 billion yuan, and alone in March, 30 billion yuan was invested. All the new capacity is directed towards high-value areas such as AI servers and high-speed optical modules. No one is interested in producing standard PCBs; everyone is focused on the lucrative high-end market.
II. Why the Sudden Expansion?
The expansion is driven by the demand for AI computing power:
AI servers differ from traditional servers in that they use high-performance chips like GPUs/ASICs, which require significantly more data transmission and thus have much higher demands on PCBs:
- They need to accommodate a larger number of components (hence the need for high-density boards, such as HDIs).
- The circuitry must be finer and more precise to ensure efficient data transfer.
- The number of board layers needs to increase (traditional boards may have only a few layers, while AI servers require dozens).
- The boards must also be more durable to handle 24/7 operations.
Standard PCBs are no longer sufficient; companies must expand into high-end production to stay competitive in the AI market.
III. Performance Trends:
Although some companies have experienced short-term fluctuations, the overall trend is positive for leading firms:
- Pengding Holdings had a tough first quarter: Revenue and profit declined, with non-recurring gains falling by 31% (due to weaker main business performance), but the situation improved in the second quarter, with revenue increasing by 10% year-over-year in June, indicating that the high-end production capacity is starting to generate profits.
- Leading firms are reporting strong growth: Hudean Co., Ltd. expects a profit of 2.8-3 billion yuan for the first half of the year, up 68%-78%; Shennan Circuit expects 2.1-2.3 billion yuan, up 54%-69%; and Shengyi Electronics expects 1.08-1.14 billion yuan, up 104%-114%. They all attribute this growth to the implementation of intelligent computing projects and the release of new high-end production capacity.
IV. The Future of the Industry:
The PCB industry is shifting from a situation of low-end overcapacity and price competition to one where high-end products are in high demand:
- Increasing demand for high-end products: There is a growing market for multi-layer boards and advanced HDIs, and companies that can produce these can command higher prices.
- Rising technical barriers: Only those with substantial capital for research and development and equipment purchases can compete in the high-end market; smaller firms will struggle to survive.
- Long-term trend: As long as demand for AI computing power continues to grow, the demand for high-end PCBs will remain strong. This is not a short-term trend but a long-term opportunity.
V. Market Reaction:
Investors are buying into this trend, with leading firm stocks soaring:
On the 24th, Pengding Holdings' stock price rose by 1.42% to 88.8 yuan, representing a total market value of 205.5 billion yuan, and an annual increase of 77%. This indicates that investors believe the expansion driven by AI is based on real demand, not just speculation.
Conclusion
The demand for AI computing power has ignited a transformation of the PCB industry towards higher-end products. Companies are investing heavily to expand production, leading firms are performing exceptionally well, and the market is optimistic. The “golden age” of this industry may have just begun. If you don't understand the technology, that's okay—just remember that AI development cannot be achieved without high-quality PCBs, and companies capable of producing these will likely earn more money in the future.